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One last chance for the Trans-Pacific Partnership? A three-month window opens

The Trans-Pacific Partnership (“TPP”) Free Trade Agreement (“FTA”) was agreed on 5 October 2015. Involving 12 countries (including Australia and New Zealand) and affecting up to 40% of the world’s population, the TPP is reputed to be the largest FTA in history.

Following agreement of the TPP text, of which intellectual property policy is a key component, the final stage in the process is for the TPP to be ratified in each country that is signatory to the deal.

The TPP has been in the news again recently in the build-up to next week’s United States Presidential elections. Both candidates, Hillary Clinton and Donald Trump have made recent statements in apparent opposition to the TPP – and as such, it appears that the TPP’s best (indeed, possibly only) chance of ratification in the United States falls within a relatively narrow three-month window between now and January 2017, when the new President will be inaugurated.

Failure to ratify the agreement in the United States does not necessarily mean that the TPP cannot proceed – it is just that it would have to proceed without the United States. However, without the endgame of free trade with the world’s largest economy, it is considered unlikely that many countries would bother to ratify the TPP; bilateral FTAs are typically simpler to negotiate and more mutually beneficial.

In effect, it’s a case of “now or never” for the TPP.

The TPP

On 5 October 2015, the Trans-Pacific Partnership (“TPP”) Free Trade Agreement (“FTA”) was agreed between the governments of Australia, Brunei Darussalam, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. Some 25 rounds of formal negotiations were required, over more than a decade, in order to secure a deal. As an all-encompassing FTA binding countries of significant political, socio-economic and cultural diversity, negotiations toward the TPP were something of a political powderkeg. All twelve signatories each have their own politics, their own legislatures and their own powerful lobbies. As such, a multilateral agreement of the scope afforded by the TPP was never going to be straightforward.

The TPP and IP

The TPP is intended to be a high-level agreement specifically aimed at emerging trade issues. Of such issues, IP was one of the foremost. The text of the TPP provides for a measure of harmonisation throughout the region, but stops somewhat short of purporting to straightjacket the various IP regimes of the member states into a single set of rules and standards. Rather, what the TPP does is prescribe minimum standards (e.g., copyright term, data exclusivity on biologics, etc.) that signatories must meet in their respective IP regimes.

The TPP, IP, Australia and New Zealand

Australia’s various IP regimes were, in large measure, already TPP-compliant as soon as the deal was signed. In large measure, this is due to the fact that Australia already has a FTA with the United States (“AUSFTA”, 2005).

From an Australian point-of-view, there had been concern in some quarters that the TPP may push up the price of medicines. However, in unison with New Zealand, Australia refused to cede ground on the key issue of clinical data exclusivity for biologic drugs – clinical data, of course, being a significant and costly hurdle that generics manufacturers must clear before they are able to launch their generic version of a drug following patent expiry. Presently, both Australia and New Zealand provide 5-year data exclusivity periods for all pharmaceuticals – and these were taken to meet the minimum standards agreed to in the text of the TPP. The United States had, on the other hand, sought a 12-year exclusivity period for biologics under the TPP. Many concerns over the price of medicines under the TPP were thereby allayed.

New Zealand, on the other hand, has recently installed new patents legislation (the Patents Act 2013) which, as it turns out, was not fully TPP-compliant. Before such time as the TPP was ratified in New Zealand, amendments to the Patents Act 2013 would need to be made by way of: patent term extension, patent grace period, unreasonable curtailment, patent linkage, additional damages for trade marks, technological protection measures, copyright term and border protection measures (among others). Ratifying the TPP in New Zealand would therefore be a significant undertaking – and if the United States was not part of the deal (New Zealand does not presently have a FTA with the United States), then the Government’s incentives to ratify the TPP may be diminished somewhat.

What’s happening in the United States in the background to the election?

January 2017, when the new President is inaugurated, is not a passive deadline in the sense that events will take their usual course – and if the TPP ends up being ratified beforehand then so be it. Rather, an interesting article published last week in The Australian, suggests that the outgoing Obama administration is being rather proactive in attempting to drive the ratification of the TPP within this relatively narrow window. Indeed, one high-ranking official gives the lobby a 45% chance of success, which is perhaps higher than one would suspect at first blush.

Is the TPP effectively dead-and-buried?

Not by any stretch of the imagination – at least, not yet. However, thinking objectively, the extremely narrow window of opportunity for it to be ratified in the United States – and the influence that any such failure is likely to have on the eleven remaining signatories suggest that the odds of the TPP now falling over are increasing by the day. That said, even if the TPP is ratified in the United States prior to the new President being inaugurated, there’s nothing to say that it cannot then be repealed.

It is perhaps too early to be sounding the death knell of the TPP. However, the clock is certainly ticking.

Patent-wise, what does the TPP/no TPP mean for Australia and New Zealand?

Increased trade, as would have occurred under the TPP, brings with it increased incentives for foreign patent applicants to file in their destination markets such as Australia and New Zealand. By corollary, if trade doesn’t increase, then neither does the incentive to file.

Perhaps in an Australia-United States context (via the AUSFTA 2005), the overall volume of trade under the TPP may not have increased significantly. However, from a New Zealand-United States perspective, significant increases could reasonably have been expected. In this latter respect, failure to ratify the TPP by January 2017 may effectively amount to a case of “opportunity lost” for the region.

Summary

All things considered – and purely in respect of IP, the TPP was possibly a good thing as far as Australia and New Zealand were concerned. Anything that provides foreigners with an increased incentive to file within this region has to be viewed as a positive (so long as it is not necessary to cede too much ground in return).

On the other hand, if the TPP does not end up being ratified, we don’t necessarily lose anything – it’s simply a case of status quo.

Shelston IP has been following the TPP negotiations for the best part of five years. We will continue to keep readers apprised of developments as they relate to IP.

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